THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[07:30:35] CHRIS CUOMO, CNN HOST: The perspective from those who have been there is very powerful when it comes to government and needed right now. Case in point, James Baker, Ronald Reagan's former chief of staff. What does he think is working and not working for our new president? CNN chief national correspondent John King sat down and got you answers.

(BEGIN VIDEOTAPE)

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: How do you convince a president who has said, at one point, that he thought climate change was a hoax generated by the Chinese?

JAMES BAKER, FORMER TREASURY SECRETARY: Well, I'm not sure we do, and we may not, but this is a good plan, both from a policy standpoint and from a political standpoint. It is a problem, right now at least, and Republicans have not been at the table because we've been, basically, skeptics or deniers.

Now, when you have companies like BP and Exxon and Total and Shell all saying we ought to have a carbon tax of some sort, I think we ought to -- we ought to listen to that. And when you see what's happening to the environment, even though it may be consistent with what's happened 10,000 years ago or 1,000 years ago, it's a risk that we don't have -- we shouldn't have to take. So, here is a conservative, free market, limited government, competitive in terms of America's competitive -- it's an America first solution.

KING: Based on your experience, as I noted, the only person that's served as secretary of state and secretary of the Treasury and White House chief of staff, the big conversation in this town and around the world is the first two-plus weeks of the Trump administration. Let me just start with a general question. How do you think they're doing out of the box?

BAKER: Well, I think they're doing well on some things and not so well on others. The big travel -- the travel ban, which has caused a lot of confusion and comment and so forth, was really not rolled out with the preparation that I think they should have given it and we're seeing the results of that now. Running the government is a lot different than running a corporation or a business where the CEO can give the order and it gets implemented. That doesn't necessarily happen in this town. You know that very well. On the other hand, they've done a really good job on some things. The Supreme Court announcement, I think, was an extraordinarily good pick. I hope and believe that he will be confirmed. The rollout on that was absolutely perfect. On the travel ban, process matters. Process really can make a difference, particularly in this town in how you roll -- how you present stuff to the public.

KING: When you see this president really step on the world stage, what do you think, and let me start with this one. When Bill O'Reilly sat across the seats like this from the president the other day about Vladimir Putin -- he's a killer. Would you have given the same answer President Trump gave?

BAKER: I'm not going to answer that question yet. I will in a minute. Let me say about pragmatism. I think this president is a pragmatist. He is a successful businessman and I think he wants to succeed.

KING: Is there a moral equivalency between the United States --

BAKER: No.

KING: -- and Vladimir Putin's Russia?

BAKER: No, no, no. No, no, no, no. I would -- there is no moral equivalency, no, absolutely not. We have a free press, we have -- we have a solidly functioning democracy, we have respect for human rights, and things like that. Having said all that, it's damn important that we find a way to have the best possible relationship we can with Russia. It may not be a very -- it may not be a good one but we need to have the best possible relationship we can.

(END VIDEOTAPE)

CUOMO: Now, people may agree or not agree with what they're hearing, but there is something to be said for thought and nuance in political statements. There's a reason these guys say things, men and women, with layers. It's not as satisfying as ordinary conversation with people.

ALISYN CAMEROTA, CNN HOST: Yes.

CUOMO: But now, you see -- there's a reason that they say it the way they do.

CAMEROTA: But I heard something else in what James Baker just said, which was an era gone by. He speaks -- his style and the way he says things is almost lost now in our political discourse. When he said I'm not going to answer your question. I will in a minute but I'm going to answer this right now. In other words, I'm not going to spin you. I will -- I hear you. I am going to address that but I'm going to do it in my terms right now. Like the politeness and the decorum --

[07:35:12] CUOMO: Right.

CAMEROTA: -- it sounded refreshing the way he was talking.

CUOMO: But there is spin in that. And I've interviewed Baker, you know --

CAMEROTA: Agreed --

CUOMO: There is spin in that.

CAMEROTA: -- but it's different than what is happening now.

CUOMO: It is different but there's a reason for it. Things are complex and it's not always as easy as yes, no, here's what I'm going to do, and I hate this.

CAMEROTA: There you go. Senator Bernie Sanders and Ted Cruz debating the future of Obamacare, so we're going to speak to the architect of the Affordable Care Act. What does he think is next?

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. TED CRUZ (R), TEXAS: It's virtually all of the Republican legislation that has been filed that the Democrats have opposed maintains a continuity of coverage so that insurance companies can't cancel policies.

SEN. BERNIE SANDERS (I), VERMONT: If you listen carefully to what you say, if you go to the doctor tomorrow and you are diagnosed with a terrible illness, the insurance companies do not have to provide you insurance.

(END VIDEO CLIP)

CUOMO: All right. As Sen. Sanders would say, the debate was pretty good between him and Ted Cruz, sparring over the future of Obamacare, but there was still a lot of political speak in there and I think we can do better and get even more incisive on what the plus-minus is for you going forward with any changes.

Let's bring in one of the architects of the Affordable Care Act, Dr. Ezekiel Emanuel. He is the chair of the Department of Medical Ethics at the University of Pennsylvania. And yes, you worked on designing the ACA but you have a full understanding for it. So, what I want to do is, I want to put each of the concerns to you -- the major ones -- and you give your answer. We'll start with the general to the specific. The first is this impression that the right is putting out for people that overall the ACA is a big mess, it is a disaster, it has made things worse. Counter it.

[07:40:15] EZEKIEL EMANUEL, CHAIR, DEPARTMENT OF MEDICAL ETHICS, UNIVERSITY OF PENNSYLVANIA: No, I mean, on any one of the three major criteria how you would evaluate the ACA. Did it improve coverage? Yes, 22 million people got insurance through the ACA, so that's a plus. Our un-insurance rate now hovers around 10 percent and if all the states had expanded Medicaid it would be even lower. On cost, yes, costs have gone up but they've gone up much more slowly than they did under President Bush and they've moderated. For example, under President Bush, insurance premiums for employers went up 80 percent, while under President Obama they went up 35 percent. A substantial reduction in the growth in healthcare costs, so cost control has actually been significantly improved.

And then, in terms of quality we've seen hospital readmission rates within 30 days of discharge going down. We've seen improvements in infections in hospitals, in nothromboemboli, no falls. So, whether access, cost, or coverage, the Affordable Care Act has been an improvement. That doesn't mean it's been a home run on every one of them but a significant improvement.

CUOMO: All right. Well, you'll have the -- the pushback is this. You've got over a million families -- a million and one-half-plus families who say I didn't get to keep my plan, I didn't get to keep my doctor. My premiums have popped, in some cases, about 100 percent. My deductible is ridiculously high. I could never cover that amount of costs, and none of this was true before the ACA.

EMANUEL: Well, in any big piece of legislation for 300 million Americans there are going to be some winners and losers, and mostly those losers were young, healthy people who were getting a great deal by the insurance companies because they were young and healthy.

CUOMO: No, a lot of families, too, Zeke. A lot of families in there.

EMANUEL: Yes, young, healthy families of people who are in their thirties with two young kids who don't use a lot of healthcare got a great deal, but people who needed healthcare didn't get a great deal. Remember, if we're going to cover everyone, including people with illnesses, the cost is going to have to be spread out over people. Some people actually, unfortunately, did get price increases.

The best solution to the price increases is to moderate healthcare cost growth and the Affordable Care Act began us on a process to do that. And it is unfortunate that deductibles have gone up. I would note the Republicans want to increase deductibles even more and so that's not a solution to the problem.

CUOMO: They say they're not going to increase deductibles and what they're going to do is increase the affordability by allowing what you would not, which is cross state lines coverage and allow companies to compete. And, as point of fact, when you look at some of these -- most of the places where the premiums have popped you see a lack of competition in those markets and when people are basically held hostage by bad plans they're going to fix that.

EMANUEL: Yes, so two points. We agree that the more competition by insurance companies, the lower the premiums. We've always tried to get a lot of insurance companies in to compete. Allowing insurance companies to cross state lines, let me make two points about that. First of all, three states allow that today. No insurance company has taken them up on it because it's not such a great deal for insurance companies. So, this idea that we're going to have massive competition because states -- insurance companies can go across state lines empirically false on the facts.

The second point I would state is it only works if you allow insurance companies to cross state lines and to sell many plans. Plans that don't have a lot of guarantees might not cover maternity care but that's not the kind of plans Americans want. They want a plan that covers their primary care, prevention, maternity care, drugs, and those plans, once you have the minimum there's not a lot of competition to be had by allowing companies to cross state lines. We do need more insurance companies in and one of the ways to do that is to actually have more people in the exchanges. Have more people and increase the demand.

CUOMO: Let me ask you something on a political level. Not your realm, but what is your message to Democrats who seem to be heading down the road that we saw with the GOP during the Obama administration of all-out opposition. If they're doing it with the confirmation picks, who knows what they'll do when it comes to legislation. If the basic assumption is they're not going to replace the ACA -- it's too big, it would be too difficult, there's too much political risk -- they're going to need the Democrats to work with them. Should the Democrats work with them and fix what they created in the first place?

EMANUEL: So, first of all, I would point out, Chris, you're right. I'm not the political brother. This is not my expertise. I'm a policy --

CUOMO: You are much better looking.

EMANUEL: I'm a policy wonk. But, I would say, you know, the Democrats have -- we have principles and we're not going to compromise on the principles. We want universal coverage. We want a system that controls healthcare costs for the average person. We want no preexisting conditions. We're going to keep Medicaid, essentially, as it -- Medicare, essentially, as it is.

Those are principles that we're not going to compromise on. And if the Republicans want to compromise or want different principles like, well, we're going to provide access but we don't mind if millions of people don't have insurance, that's not a bargaining position.So, it very much depends upon what the principles that we can all agree to are.

[07:45:20] Fortunately, I think, the president has said he wants a terrific plan that covers all Americans. He wants preexisting condition exclusion there. He wants to keep kids on their plan until age 26. He wants Medicare, essentially, as it is. We're not going to a voucherized system. I mean, that begins to look like things the Democrats might agree to. But we need to understand what the principles are.

As Ted Cruz said last night, his principles are not the ones that Democrats are going to agree with by ending up throwing off millions --

CUOMO: Right.

EMANUEL: -- of people out of insurance.

CUOMO: Well, it depends where you want to start. If you want to start with those principles you can, but you also have to look at the pragmatic nature of it. You've got over 1.5 million families. You need to do better for them to fix this or there to be --

EMANUEL: Chris, the alternative is to throw 22 million people off of insurance. That's how come it's a much worse --

CUOMO: That's unacceptable.

EMANUEL: -- problem.

CUOMO: That's unacceptable for both sides. Zeke, as we get the ideas we'll being you back and we'll hash it out again. Thank you, Doctor, appreciate it -- Alisyn.

EMANUEL: Thank you.

CAMEROTA: All right. First Lady Melania Trump is involved in lawsuit over a scirlous claim it was published in the "Daily Mail." Why her attorneys say this false claim is costing her millions.

(COMMERCIAL BREAK)

[07:50:25] CAMEROTA: Melania Trump refiling a lawsuit claiming that she's lost the chance to make millions of dollars as first lady because of a tabloid story. This is a libel case. It's against the "Daily Mail" online, a British tabloid, and it was acknowledged as a false story.

So, let's discuss where this leaves us with Brian Stelter, CNN senior media correspondent and host of CNN's "RELIABLE SOURCES." And, Bill Carter, CNN media analyst and author of "The War for Late Night." Gentlemen, great to have you here.

This is fascinating because it involves the first lady, something that we've not seen before. This was a scirlous article printed by the "Daily Mail." The retracted it -- it was bad and false -- but in her law filings -- her legal documents to the court, Brian, the argument that her lawyers are making is that this is a golden opportunity that Melania Trump is having -- a once in a lifetime opportunity as first lady. An opportunity to make millions of dollars.

BRIAN STELTER, CNN SENIOR MEDIA CORRESPONDENT, HOST, CNN "RELIABLE SOURCES": Yes, a unique, one of a life -- once in a lifetime opportunity -- that's what the new legal filing says -- to launch a broad-based commercial brand. It doesn't explicitly say because my husband's in the White House --

BILL CARTER, CNN MEDIA ANALYST, AUTHOR, "THE WAR FOR LATE NIGHT": Right.

STELTER: -- but it implies that because Trump is in the White House, Melania will be able to profit.

CAMEROTA: But is being first lady supposed to be a moneymaking endeavor?

STELTER: I have not seen it be that in the past.

CARTER: No.

STELTER: Oftentimes, after your time in the White House -- you know, maybe Michelle Obama can go on to make some money now. We've seen that from other first ladies.

CAMEROTA: Hillary Clinton.

(CROSSTALK)

CUOMO: So what's the -- what's the criticism of that? There's nothing illegal with what she --

CARTER: No, it's not illegal, it just looks like you're taking shameless advantage of your position, which, you know, the Trump family has been accused of across the board. It's not unusual for the Trump family. What's interesting is the lawyers in the case, after filing this, have backed off and said well, she's not really trying to cash in on being first lady, although the language --

CAMEROTA: Then why do they want the $150 million?

CARTER: -- is in the suit. The language is in the suit. They're looking for a settlement based on --

CUOMO: Right, but isn't it because she is an existing --

CAMEROTA: It's a missed opportunity.

CARTER: Yes.

CUOMO: Right, but of an existing brand I don't think it's as blatant as -- you know, as Brian says, there's no specific language in there about that right now I'm in a position where -- but that she's a brand and you've hurt my brand commodity value by lying about me.

CAMEROTA: And that this is a golden opportunity right now --

CARTER: Right now.

CAMEROTA: -- meaning in the White House.

CARTER: They do make that point --

CUOMO: Right.

CARTER: -- that right now is the opportunity that she has because, obviously, her profile has been greatly raised and you've damaged my standing. I think it's -- I don't think it's them necessarily saying she really wants to launch a brand as much as you've -- we've missed the opportunity. We want you to pay for that --

CUOMO: Right. CARTER: -- and we want money out of it.

CUOMO: So, that's not --

STELTER: It's not a good look. It's just not a good look.

CUOMO: That's the criticism of it optically. The good news about it, and it plays into a segue for us, is this is what you do. If you don't like what the media reports and you know it's wrong and demonstrably false and defamatory -- slander, libel, whatever it is -- you sue. You prove it. She did that. She got that blogger to come out and there are a lot of people like that in his universe where there -- they pose as legit but they're not. They're just an attacking mouthpiece. And she got a guy and he had to apologize. We'll see what happens with the call.

The president does it a different way. He says I don't like what Stelter's reporting, it's fake. The whole media is fake. They're bad people and they have their own reasons for lying to you. And people lap it up because there is suspicion. The media deserves some scrutiny. The president is an impressive, powerful figure and very often he's not telling the truth. And Kellyanne Conway came out -- are we going to play the sound or are we just --

CAMEROTA: Yes, we have it.

CUOMO: Kellyanne Conway came back on CNN to try to put some of this to rest --

CARTER: Yes.

CUOMO: -- and here's what she said in answer to what, I think, is the fundamental question.

(BEGIN VIDEO CLIP)

KELLYANNE CONWAY, WHITE HOUSE SENIOR ADVISER: No, I don't think CNN is fake news. I think there are some reports everywhere -- in print, on T.V., on radio, in conversation that are not well-researched and are -- and are sometimes based on falsehoods.

(END VIDEO CLIP)

CUOMO: Good for her --

CARTER: Sure.

CUOMO: -- and true. Then prove it. You know, I say all the time, show me what we said that was wrong.

CARTER: It does, but I -- and I also think the press has to continue saying these things are factually incorrect, and they can't back off from it because initially they were trying to intimidate the press. I think they're backing away from that. I think they feel like that's not a winning strategy anymore. They're not scoring the way did in the campaign.

CAMEROTA: How do you know that? What are you basing that on?

CARTER: I'm basing it on what --

CAMEROTA: This one thing that she came out --

CARTER: That thing really came out --

CAMEROTA: I think it's significant, too, but that's only one sign.

CARTER: I thought it was a total new approach. When have you seen her not combative like this? When have you seen here saying thank you for having me on? That looked like the approach to make.

CUOMO: When she has some high ground. She got busted about the Bowling Green massacre. Forty-seven-year high of crime is demonstrably false.

CARTER: Right.

CUOMO: Calling us fake news and we keep proving that they're the ones abusing truth. It gives you no leverage.

[07:55:04] STELTER: I think Bill's being overly optimistic here. I think we're continuing to see an us versus them dynamic. The White House trying to make press -- the press -- the them, the enemy, the opponent in various ways.

CAMEROTA: But then, why did Kellyanne take that different tone yesterday?

STELTER: I think she was in a very difficult 25-minute interview with Jake Tapper. She knows CNN is real news, not fake news, so eventually she had to say it.

CARTER: And her credibility had been damaged -- seriously damaged by the Bowling Green thing.

STELTER: But we're continuing to see the president say you should only trust me. Don't trust anybody else, only trust me. To his voters, I would say, what if President Obama said that to you?

CAMEROTA: Bill, Brian, thank you very much.

CUOMO: All right. Kellyanne Conway was certainly under fire for another comment that she made a week ago. That's what we're talking about right now. Here it is.

(BEGIN VIDEO CLIP)

CONWAY: But it's brand new information to people that President Obama had a six-month ban on the Iraqi refugee program after two Iraqis came here to this country, were radicalized, and they were the masterminds the Bowling Green massacre.

(END VIDEO CLIP)

CUOMO: Matthews, caught in the fog of war, did not pick up on the fact that the Boston -- Bowling Green massacre never happened. It actually wants even the first time Conway had said it, but she apologized. Residents in the Kentucky city that she referenced are taking Conway's comments in stride. CNN's Martin Savidge live in Bowling Green with reaction. A lot of internet memes have erupted about Bowling Green and people who are saying they were there on the day it didn't happen.

MARTIN SAVIDGE, CNN CORRESPONDENT: There is -- there is so much that is said. Welcome to Bowling Green, Chris. It is a community where just about everyone can tell you exactly where they were when the massacre didn't happen.

(BEGIN VIDEOTAPE)

SAVIDGE: Overnight, the Bowling Green massacre became the biggest thing to never happen here.

SARAH WOODWARD, BOWLING GREEN RESIDENT: I was in my English 100 class and we were reading "Hamlet." And then, all in Cherry Hall the sirens were going off. We had to evacuate the building and I've never looked at "Hamlet" the same way again.

SAVIDGE: They held a candlelight vigil on the square with signs that read "Never Remember" and "We Are Bowling Green."

UNIDENTIFIED MALE: I survived.

SAVIDGE: A local production company made a parody video.

UNIDENTIFIED FEMALE: I just barely survived the Bowling Green massacre.

UNIDENTIFIED MALE: I survived -- what was it?

SAVIDGE: A massacre mock-umentary.

(Dog growling)

The massacre misspeak has some laughing all the way to the bank. Connie Collingsworthstarted a button business in her home. She cranks them out with sayings like "I Survived the B.G. Massacre." A portion of her profits going to the ACLU.